## Calculating Monthly Mortgage Payments

This is a remarkably simple calculator that can be used by a prospective homeowner to estimate the monthly payments due on a home loan or mortgage. The calculator only requires three inputs, including:

- The total home loan, or mortgage, which is the amount of money to be borrowed
- The annual rate of interest charged on the loan, which is a different value than the loan’s stated annual percentage rate, or APR (more on that later)
- The term on the loan, stated in years, which is the amount of time over which the loan will be repaid

The calculator then provides the user with three outputs, including:

- The monthly payment, which is how much money needs to be paid to the lender each month to repay the loan
- The total amount of interest charges paid the lender over the term of the loan
- The total of all payments made to the lender, which is also the sum of the interest charges plus the total home loan

### Calculating Mortgage Payments

The beauty of this calculator lies in its simplicity. With only three inputs this tool can supply a wealth of information, including how much the monthly payments will be on a mortgage, the total amount of money to be repaid the lender, and the loan’s finance charges. You can quickly work through a number of “what if?” scenarios and see the impact on your personal finances.

The best approach to using a tool like this is to change one variable at a time. For example, you can run through several scenarios involving differing loan amounts. You could also see what happens when the term of the loan is varied. While this calculator does not limit the term of the loan to certain values, the most common terms for a mortgage are 15, 20 and 30 years. Once again, leaving the amount of loan fixed, then adjusting the term of the loan will allow you to see the impact this change has on the monthly payment and interest charges.

### Interest Rates versus Annual Percentage Rates

Earlier we noted that a loan’s annual percentage rate, or APR, is different than the interest rate charged on a loan, which is used to figure out the monthly payment. Lenders in the United States must quote the loan’s APR to make it easier for borrowers to compare loans since this value includes the impact the lender’s fees have on the total cost to borrow. APR can be viewed as an “all in” cost of the mortgage, including the finance charges as well as fees associated with processing the mortgage. Lenders will always disclose both the loan’s interest rate as well as its APR. The critical point to remember here is when using this calculator you want to enter the loan’s interest rate, not the APR.